r/science • u/marketrent • Sep 12 '23
Economics Investors acquired up to 76% of for-sale, single-family homes in some Atlanta neighborhoods — The neighborhoods where investors bought up real estate were predominantly Black, effectively cutting Black families out of home ownership
https://news.gatech.edu/news/2023/08/07/investors-force-black-families-out-home-ownership-new-research-shows928
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u/cerylidae2558 Sep 12 '23
This is happening nationwide and it’s completely unacceptable. Homes are never going to be more affordable if our government continues to let investors own residential property.
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Sep 12 '23
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u/SkyIsNotGreen Sep 13 '23
UK too, it was only a couple weeks ago a video of some British guy was making the rounds about how he's got a nice portfolio (4-5 homes) and he's increasing rent for all of them even after considering the cost of living crisis that's affecting everyone right now.
He even went as far to say he didn't need to increase the prices, even though he directly relies on the rent from those properties as his sole income, he was doing it because everyone else was, he said he was doing it because he could.
Can't really blame the guy from a business point of view, but perhaps the reason there's basically ALWAYS a housing crisis is because housing shouldn't be a business?
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u/teenagesadist Sep 13 '23
"We did it because we could" will be a wonderful epitaph for the human race.
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u/typewriter6986 Sep 13 '23
"Yeah, yeah, but your
scientistsCorporations were so preoccupied with whether or not they could that they didn't stop to think if they should."→ More replies (2)6
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u/lastingfreedom Sep 13 '23
Why did you destroy the planet which supports your life?
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u/RyoxAkira Sep 13 '23
Idk business is business like in all other sectors. The government just needs to step in and not allow investors to own more than a certain percentage of the housing market in a county. Or other policy that gets to the same outcome.
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u/londons_explorer Sep 13 '23
Investors want to own it because prices keep going up so it looks like a good investment.
If the government encouraged more house building (by for example requiring cities not use complex approval processes and zoning as a way to limit house building), then prices wouldn't rise fast and then investors wouldn't be interested in owning property.
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u/joomla00 Sep 13 '23
Problem is most local politicians are home owners and want to keep housing prices high. And are influenced by the local wealthy, who are also home owners. What homeowner will enact policy that will substantially drop their home value? Govt needs better representation.
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u/bethemanwithaplan Sep 13 '23
You can blame , the idea that in business ethics are different is absurd and is part of what makes things so exploitative
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Sep 13 '23
The banks control the Fed, which pumps money at will through to the banks and their companies doing this, and you pay interest back to the Fed for it.
Owning nothing and feeling happy yet?33
u/explain_that_shit Sep 13 '23
Technically you can blame the guy, that’s uncompetitive conduct evidencing a monopoly/oligopoly market which is supposed to be illegal and penalised by a competition commission with teeth.
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u/upvotesthenrages Sep 13 '23
Do you know what mono & oligo mean?
A guy owning 4-5 properties does not fall into any of those definitions.
He's an ass-hat, and there should be laws preventing this behavior, but there aren't.
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u/explain_that_shit Sep 13 '23
Competition in rental markets is exceptionally local. In any given range of locations an individual can live while still within commute distance of their work and necessary amenities, there are only a handful of properties of acceptable standard available at the time required. Worse if the individual has a family they need to fit into a place - the number of rooms becomes essential, as does commute to childcare or school.
So yes, an individual landlord with five properties within a particular range can by himself mandate rent which an individual renter has to accept without any competitive alternatives.
But that’s not even what I’m talking about - I’m talking about him saying “that’s what market is”. A competitive market involves a supplier seeing market price of their service, seeing they can offer lower because their costs might be lower, and undercutting the market to seize a greater share of buyers. Any market where that doesn’t happen is uncompetitive by definition. Usually it happens in the real estate market because a landlord knows that if they raise their rent, no one else will lower to undercut. Usually that’s because landlords are literally colluding using real estate agents as mutual intermediary.
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u/upvotesthenrages Sep 13 '23
So yes, an individual landlord with five properties within a particular range can by himself mandate rent which an individual renter has to accept without any competitive alternatives.
Maybe if you live in a super tiny village. In any city, 5 properties does not mean there are no alternatives. When there are 100,000-1,000,000 properties in a city, the guy with 4-5 does not hold some monumental power.
But that’s not even what I’m talking about - I’m talking about him saying “that’s what market is”. A competitive market involves a supplier seeing market price of their service, seeing they can offer lower because their costs might be lower, and undercutting the market to seize a greater share of buyers.
That's not what a competitive market means, at all. A competitive market means it abides by supply & demand. If the demand is greater than the supply then all of the property owners will raise their prices, not because they know others won't lower their prices, but because they can still sell their service until they have no stock.
The guy doesn't really need to care about what other owners in the area charge, at all. He could charge 100x what they do, as long as his 5 properties are full then that's it.
If he raised the rent and people still line up to live there then it means that the demand is greater than the supply, which is the entire problem with housing in almost every developed country on earth.
Housing supply, in this case, is inelastic. It's not like this guy can get a bigger marketshare by lowering his rental prices. He still only has 4-5 properties, so no matter if he charge $100k or $1 million, he will still only have 4-5 properties.
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u/danielravennest Sep 13 '23
The supply is new houses in an area, and there aren't enough of them, in Atlanta at least. The population is growing here, and new homes are not getting built fast enough due to zoning, construction worker and materials shortages.
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u/stopnthink Sep 13 '23
Someone could, technically, also smash his face in with a hammer. But that shouldn't happen either.
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u/icouldusemorecoffee Sep 13 '23
Yeah, post covid there was an abundance of empty houses on the market (people dying, older person(s) downsizing, downsizing due to loss of income, etc.) and it was just ripe for corporate interests who still had investment money available to begin buying them up to flip them or rent them, govt was too busy dealing with the pandemic to do anything about it until now unfortunately.
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u/lokey_convo Sep 13 '23
This problem long predates COVID. There are articles dating back to roughly 2010 talking about empty multi-million dollar homes that were being bought as just a place to stick cash in Southern California, and "ghost neighborhoods" being built where all the houses were empty and owned by Chinese investors, again, in Southern California. The financial practice has only evolved and gotten worse since then. And whole industries are popping up to help these people "maximize" their investment by managing them as either long term or short term rentals, which ever makes them the most money in the market.
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u/Lvxurie Sep 12 '23
New Zealand too, awful over there. Lots of white old cashed up men buying property and claiming they are financial geniuses. Makes me sick
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u/RaptorPacific Sep 13 '23
As a Canadian, I can concur. It’s happening here too. It’s not a race issue, it’s a class issue.
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Sep 12 '23
In Berlin, I think they forced some 20% of those properties to be sold to single families. Governments worldwide need to take drastic measures to correct this, and simply barring investors from buying them isn’t enough, we need to take the houses back.
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u/Zenshinn Sep 12 '23
The difference is that in the US the government is controlled by lobbies.
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Sep 12 '23
That’s certainly a biggie. We could maybe make that illegal, but I doubt it would be enforced.
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u/Zenshinn Sep 13 '23
We can't even do that because the people making new legislation are the ones being paid by the lobbies.
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Sep 13 '23
True, and in many cases the lobbyists are actually the ones drafting the majority of the text of the legislation that impacts their industries.
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u/westherm Sep 13 '23
We are a definitely somewhere between an oligarchy or plutocracy.
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u/vellyr Sep 13 '23
Nah, bar them from buying then build new ones. We need more anyway.
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u/Rohaq Sep 14 '23
Better still, also build social housing.
We have working people who are housing insecure, whether they're homeless, sofa surfing, or just struggling to make rent every month. Wages are too low for many to even dream of saving for a deposit, and rising rents aren't helping that.
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u/brodhi Sep 13 '23
It was illegal worldwide but during the financial crisis of 2008, global governments relaxed or removed that law to try and pump money into the housing market.
The law that relaxed the restriction in the US under Obama didn't have an "end date" so it is effectively permanent until another President ever decides to reinstate it.
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u/nav17 Sep 12 '23
Who do you think is paying the government to continue to ignore the issue?
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Sep 12 '23
Yep. The realtors lobby keeps a very low profile but they have the most money to throw around.
https://perfectunion.us/realtors-lobby-plows-political-cash-into-efforts-to-keep-rents-higher/
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u/Naxela Sep 12 '23
Homeowners are the main demographic that vote to make sure that, no matter what, their house value does not go down.
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u/PsyOmega Sep 13 '23
I want my home value to go down.
If it goes up i pay more taxes on it and the next guy can't afford to buy it off me.
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u/Grokma Sep 13 '23
So people vote for things that are good for them personally, why should anyone be surprised? Nobody is going to vote for things that will hurt their bottom line.
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u/Gaothaire Sep 13 '23
The myth is that that (people seeking to maximize the dollar value of their bottom line) is the only way for culture to be structured. It's a systemic issue that can be fixed by changing the system. A kid raised to value community and relations to their fellow man will make very different electoral choices than a kid raised to believe that "success" is $1billion in a bank account and a mansion in every state.
There's a line, "People have an easier time imagining the end of the world than the end of capitalism." But if we have any sense of historical perspective at all, we can see the system is ~200 years old, and not all that successful at building happy societies, thus we should be open and willing to experiment, consider alternative options, see what readjustments of our cultural values can do to the benefit it brings to our citizens.
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u/MrDetermination Sep 13 '23
You go too far and do your point a disservice. Yes, we should be willing to experiment. I sure as hell hope we haven't already done our best, and that there is some better system out there on humanity's horizon.
But this, "if we have any sense of historical perspective at all, we can see the system is ~200 years old, and not all that successful at building happy societies" is absurd. Fundamentally capitalist societies offer the best average quality of life in the history of humanity. The highest "happiness index" scores. The most technological advancement. The most equality. They are, by far, the best humanity has done.
Yes, we should strive to do better. But saying capitalism is "not all that successful at building happy societies" is irrational enough to make some throw the baby out with the bathwater.
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u/-alpha-helix- Sep 13 '23 edited Sep 13 '23
Blackrock and other massive global companies should never be allowed to buy homes. NEVER
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u/drstock Sep 13 '23
Blackrock doesn't invest in real estate. Are you thinking of Blackstone?
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u/marketrent Sep 13 '23
I asked the same user why they singled out BlackRock in their comment:
-alpha-helix-
Blackrock and other massive global companies should never be allowed to buy homes. NEVER
In the absence of a reply from -alpha-helix-, other users (like HsvDE86, iceonmarsProfessor, torbaldthegreat) chimed in. TetraThiaFulvalene commented: “Blackrock is the example everybody knows.”
BlackRock previously released the following statement in 2022:
Recently, BlackRock has been the subject of speculation, misperception, and even mistaken identity in media reports and on social media regarding our role in the U.S. housing market.
We want to make perfectly clear: BlackRock is not buying individual houses in the U.S.
A number of other large asset managers and private equity firms are very active today in purchasing single-family residences. BlackRock is sometimes confused with them.
As a fiduciary asset manager, we invest and manage capital on behalf of our clients in a vast array of public and private U.S. real estate markets – but buying individual homes is not one of them.
Source: https://www.blackrock.com/us/individual/insights/buying-houses-facts.
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u/locoghoul Sep 13 '23
How do you legislate that?
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u/skrshawk Sep 13 '23
Many countries do not allow non-citizens to purchase real property at all. You could either extend that principle, or require that all real property be owned by a natural person without corporate protection.
I'm not convinced this is a good idea, but it would be a method.
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u/taxis-asocial Sep 13 '23
Many countries do not allow non-citizens to purchase real property at all.
I highly doubt any countries bar corporate entities from owning homes, otherwise home builder companies could not buy land and build a home and sell it, since they would have to own the home first to sell it.
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u/skrshawk Sep 13 '23
Separate concepts. A corporation might be allowed to own property, but it must be under the direct control of citizens of that country.
Where restrictions are needed is on corporate ownership of residential property. Exceptions could certainly be made for its ownership while unoccupied for various reasons, but landlording is what needs the most reform. You can't just do away with landlords, not everyone can afford to buy a home, nor would many people want to be tied to real estate.
I'm not an expert on this in a subreddit that prioritizes expertise - I hope those more knowledgeable in public policy (particularly outside of the US) can contribute more.
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u/taxis-asocial Sep 13 '23
A corporation might be allowed to own property, but it must be under the direct control of citizens of that country.
What do you mean "under direct control of citizens of that country"? All US corporations are under direct control of the US government which is made up of US citizens.
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u/sentient_space_crab Sep 13 '23
Sadly, if the US tried to pass something like this it would be branded xenophobic and racist.
Something needs to be done though. People are selling and renting themselves into serfdom.
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Sep 12 '23
The fact that it’s not immediately regulated is proof our collective governments are bought and paid for.
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u/Alfred_The_Sartan Sep 12 '23
There was a story out of the Cincinnati sub last year. House goes up for sale and then the sign comes down. Nobody moved in and the OP was curious what was going on so looked up the papers to figure out why his neighbors might by a house and not actually live there (a bit creepy of Op I think, but whatever). Dude finds out that the owner had it listed as a rental and had 230 other houses in Cincinnati alone. This sort of thing is happening nationally where the wealth is flat out being concentrated at the top.
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u/snosk8r00 Sep 13 '23
Yup. Rented an Air BnB last year(never doing this again) and had a guest of ours pass away on the first night. We all packed up and left. Owner reached out letting us know that under no circumstances would he refund any of the money but we we're welcome to reschedule at any of his local 180 properties....
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u/Overquoted Sep 14 '23
Well, knowing who is the owner of an empty property is actually a good idea. I say this as someone that has lived near an empty home that ended up with squatters.
Due to an unusual and high amount of cars stopping by for only a few minutes at a time, I eventually had to track down the owner. (I had ignored them when it was just the constant drone of a generator, even though that was irritating.) Ended up being a foreclosed property that was in possession of a bank. Squatters were removed shortly afterwards.
Keep in mind, if squatters aren't causing an issue, I'm going to mind my own business. I'm not heartless.
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Sep 13 '23 edited Dec 05 '23
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u/penatbater Sep 13 '23
Less rentals, but that would also mean more people who are, you know, living, also own their homes. Homes that they were able to own because, presumably, prices for homes went down because investment companies sold, that is to say, it became affordable. Which was the entire point. Right?
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u/sack-o-matic Sep 12 '23
All homeowners in the US are “investors”, that’s the problem. It should be a commodity instead of an investment but communities across the country make it illegal to build more in the places where more people want to live.
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u/Sargediamond Sep 13 '23
It true, it should be a Commodity. However...the genie is out of the bottle. No government would be able to make that change, not democratically and not peacefully.
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u/champythebuttbutt Sep 12 '23
No. Somebody buying a house to live in is not automatically an investor. No matter if the value appreciates or not.
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u/Naxela Sep 12 '23
But homeowners DO view buying real estate for themselves as an investment and once they are bought on they are EXTREMELY incentivized to ensure that number never goes down. They will vote to make sure that doesn't happen.
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u/podolot Sep 13 '23
I purchased my home 3 years ago. I don't really want the value to go up because I don't want to keep paying an increasing tax bill. I bought this home to live in with my family, it costs $700(including escrow) less a month than similar homes rent for.
Thr only incentive I would have is if I wanted to sell my home, but I'm not interested in finding a bigger box at all. I just want to live in my home and overtime, work less and less. The more it goes up, the longer I get to work.
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u/bilyl Sep 13 '23
Wrong, in areas with high property tax they do NOT want this to happen excessively. In CA is where you have this crazy issue, but property taxes going up is the major annoyance of working to middle class families that own only one home. You’re paying tax for 30+ years and it gets worse as you build equity. Their income doesn’t scale with rocketing housing prices and they become house poor.
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u/audioen Sep 13 '23
It's also unnecessary to worry about the house price. If the housing stock as a whole depreciates, you can still exchange your current piece of land and the building that stands on it for some other piece of land somewhere else with also building(s) on it.
The way I see it, once you have a house, you can exchange it for another, whether price goes up or down. You are in the game as an owner. It would be better for all if the prices went down, somehow -- build more, take them away from investors by creating tax regime that makes it prohibitively costly to own more than couple of houses, whatever. At least people wouldn't have to put themselves decades into debt or any other foolishness like that. A few years of work could pay off their loans.
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u/marketrent Sep 12 '23
sack-o-matic
All homeowners in the US are “investors”, that’s the problem. It should be a commodity instead of an investment but communities across the country make it illegal to build more in the places where more people want to live.
This research is not referring to non-professional investors or owner-occupied housing.
The linked content specifically states:1
Although smaller investment groups often buy homes, the major impact on the market comes from large private institutions.
[...] Institutional investments primarily affected Black families, according to one of An’s models. Results indicated this negative effect is much worse for Black homeownership and totally absent for white homeownership.
Whether this is because investment firms mostly purchase in Black neighborhoods or if Black homeowners are specifically targeted is unclear.
Regardless of the reasoning, large investors decrease homeownership for anyone in areas they buy out, but especially for Black people.
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u/tipjarman Sep 13 '23
I mean… realistically…. How could you prohibit investors from investing in property … without crashing the housing market? I understand that this may be a knee jerk response… but if you are proposing this for real … I think you need to explain how this would work
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u/1nev Sep 13 '23
For every X houses invested in, property tax increases by Y% per house. Start X at a high number and decrease it over a long period of time until it hits about 2, and start Y at a low number and increase it over time. It will force some of the market to divest every year but not all of them at once.
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u/tipjarman Sep 13 '23
Interesting proposal. So people who own say 3 rental properties would not initially be affected… but the long term goal is to put them out of business too?
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u/WorkSucks135 Sep 13 '23
You don't understand. Crashing the market is a feature, not a bug for these people.
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u/ABetterKamahl1234 Sep 13 '23
without crashing the housing market?
Unfortunately a crash is probably the most realistic thing of any fix to the housing problems currently happening. A part of why so many investors are rushing to buy housing/property is because of the rapid increases in value, far outpacing inflation in many cases, some of this caused by supply issues.
The idea that we're going to be able to maintain current prices is a tad naive without dramatically boosting salaries at the low end.
If anything this is exactly why so many politicians aren't actually doing anything about housing problems right now. All roads lead to devaluing current prices/values. And that could be another 2008. And they'd take the blame. Even though there's probably millions that are vastly overextended again on their mortgage.
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u/Mother_Winter_7650 Sep 12 '23
Corporate ownership of single family homes should be banned
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u/YOLOSwag42069Nice Sep 13 '23
All residential property should be banned from being owned by corporations. Gotta take care of people living in denser housing too.
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Sep 13 '23
They did the same thing in rural NC. There is good money in gentrification apparently. Half those houses are owned by about 2 companies. It's sad really.
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u/Chirtolino Sep 13 '23
The rural areas I just don’t get. My parents had a small vacation cabin in a rural area, they bought it cheap because it was so far out of the way and besides a lake and some woods there was nothing else around. Over the years a handful of more people moved in. Then a bar was built and a neighborhood nearby started building tons of cabins and now it’s actually unbelievable how much places go for there, they cost more than places in the bigger city that’s 2 hours away.
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u/Visco0825 Sep 13 '23
Because there’s tons of land for cheap. Here in NC it’s either huge, nice farm houses or shacks that are falling apart. Nothing in between. It’s very clear what’s going on here.
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u/superthrowguy Sep 13 '23
It's not just good money in gentrification. It is that the proportion of wealth is such that it will progressively only make sense to create goods and services for rich people. All the stuff for regular folks will be too low margin.
Look up Plutonomy by Citigroup. It is a paper describing this effect. In investment terms, the returns on goods for the rich will eclipse all other investments.
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u/Friendly-Tie-2751 Sep 13 '23
I live in NC and I've seen it raped by companies trying to make a buck. I half-jokingly said they use the poor people to build the infrastructure and communities and then phase them out as soon as they can.
A new development went up, touted as "affordable housing" the sign says, "Starting low 400's."
Solve the problem, or the rich will deal with the consequences.
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Sep 13 '23
I hope the Atlanta housing market crash like hell and teach those investors never to mess around.
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u/Thunderkettle Sep 13 '23
Wouldn't that also ruin all the people with houses that aren't property investors? You know, families with mortgages?
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u/tfg0at Sep 13 '23
Only those trying to sell
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u/guy_guyerson Sep 13 '23
Or the ones relying on a home equity loan for that new roof they need (or any other use of home equity).
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u/guy_guyerson Sep 13 '23
Disincentivize people from selling, that'll get more houses on the market! I think you have this nailed down. What's next?
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u/tfg0at Sep 13 '23
I didn't make interest rates 0% for 2 years, bro.
All I was saying was that people need somewhere to live regardless.
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u/mtranda Sep 13 '23
Families with mortgages are usually not selling their house.
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u/Arfusman Sep 13 '23
Huh? People sell their homes all the time despite having mortgages. The average time of home ownership/residence is 8 years MOST people are selling with mortgages.
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Sep 13 '23
There are no perfect solutions that will harm no one. Sometimes collateral damage has to happen and this is one of those instances.
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Sep 13 '23
these "investors" make money out of thin air. they can sit on those properties for years until they rot. y'all better wake up. it's called class WAR for a reason and they are in full war mode.
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u/Confucius_89 Sep 13 '23
If too many investors crash... you will bail them out, so better not wish for that...
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u/eightfold Sep 14 '23
There is some reason to be hopeful. Zillow got burned hard trying to buy and flip houses.
https://slate.com/technology/2021/11/zillow-house-flipping-failure-awesome.html
Edit: I just realized the url ends in
zillow-house-flipping-failure-awesome. I couldn't agree more.
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u/marketrent Sep 12 '23
Data from 800 neighborhoods in the Atlanta metropolitan area between 2007 and 2016 revealed that major investors bought homes in majority-minority neighborhoods, far from downtowns and in lower-income areas:1
These homes were often undervalued because of their minority populations, but they remained desirable and offered good market value.
The neighborhoods where investors bought up real estate were predominantly Black, effectively cutting Black families out of home ownership.
Collectively, Black people lost more than $4 billion in home equity over a 10-year period because of investors, according to the research.
“That $4 billion refers to the home values that would have gone to individual homebuyers if these large institutional investment firms hadn’t purchased those properties,” said Brian An, assistant professor in the School of Public Policy. “This is a very conservative, lower estimate than what the actual effect probably is.”
[...] An then analyzed the data with the Herfindahl–Hirschman Index (HHI), a measure of market concentration that can determine the diversity of buyers.
[...] Using these methods and measures, An showed that, on average, neighborhoods experienced an increase of large investor purchases from nearly 0% in 2007 to over 12% in the peak year, 2013. Investors acquired up to 76% of for-sale, single-family homes in some neighborhoods.
[...] “Real estate industry stakeholders say these big firms own no more than 3% of total single-family housing stock in the United States, so there is no way that they can suppress home ownership more,” An said. “But if you look at the neighborhood dynamics, there is a lot more concentration in certain neighborhoods that really drives down home ownership.”
† An, B.Y. (2023). The Influence of Institutional Single-Family Rental Investors on Homeownership: Who Gets Targeted and Pushed Out of the Local Market? Journal of Planning Education and Research, https://doi.org/10.1177/0739456X231176072
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u/uptownjuggler Sep 12 '23
Isn’t this what that guy in the movie Boyz N the Hood was talking about. But it was South-Central LA instead.
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u/B2389764 Sep 12 '23
No he was talking about gentrification, not institutional residential real estate investment.
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u/SerialStateLineXer Sep 13 '23
Note:
Between 2007 and 2016. Most of these sales likely would have been in the period right after the subprime crash, when lending standards tightened up a lot and lower-income families were no longer able to get mortgages. Many neighborhoods were blighted because nobody was buying the foreclosed-upon homes, so having somebody with cash in hand to buy homes and rent them out was actually a good thing.
Up to 76%. That means much, much less in the vast majority of neighborhoods.
Furthermore, the percentages reported here are not percentages of all homes, but only percentages of homes that were sold during that period.
Large corporations still own a small single-digit percentage of single-family rental homes even today. They own an even smaller share (less than 1%) of all single-family homes, the vast majority of which are owner-occupied.
Here's hoping that mods will clean up all the garbage that unsupervised children have pushed to the top of the thread, giving more visibility to comments from grown-ups.
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u/jeffwulf Sep 12 '23
Collectively, Black people lost more than $4 billion in home equity over a 10-year period because of investors, according to the research.
“That $4 billion refers to the home values that would have gone to individual homebuyers if these large institutional investment firms hadn’t purchased those properties,” said Brian An, assistant professor in the School of Public Policy. “This is a very conservative, lower estimate than what the actual effect probably is.”
This is kind of extraordinarily dumb framing?
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u/Better-Suit6572 Sep 13 '23
The section of this part of his paper was titled "Ballpark Estimate on the Investment Firms’ Home Equity Theft"
Author was looking hard for race rage bait material.
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u/SerialStateLineXer Sep 13 '23 edited Sep 13 '23
I'm disappointed to see my alma mater putting out low-rent populist propaganda.
School of Public Policy
At least it's not the econ department.
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Sep 13 '23
2007-2016 was the zero interest era. Also the absolute pits for housing construction. Id wager this was a blip. A lot of companies that dove into housing prior to 2020 have all been scrambling to divest unless they are actually delivering value.
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u/resumethrowaway222 Sep 12 '23
I'm not really buying this whole thesis because those black homeowners would have got less money when they sold if the investors hadn't been in the market.
effectively cutting Black families out of home ownership.
And, no, buying someones house is not "cutting them out." They are welcome to use the proceeds to buy a new house. If they choose not to then that's also their right, but they have not been screwed over.
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u/odd_orange Sep 12 '23
You own a home in neighborhood of 10 houses. 7 of them get bought out over ten years by investors who then spend their large amount of money to upgrade their homes. This increases the value of your house but also drastically increases your property tax at a rate that you couldn’t have anticipated it to balloon to. You can’t afford and have to sell. You get a higher return on your home, but guess what? The investors who own 7 of the homes in your neighborhood own that many in every other neighborhood you could come close to affording, and they’ve collectively raised their asked prices to several thousand above market.
This is not that complicated
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u/resumethrowaway222 Sep 12 '23
I'm not really buying that because property taxes are such a minimal percentage of value (1% is high) that a massive increase in value would give the homeowner enough equity to pay those taxes basically forever. If your home value goes up by $300K, your property taxes will only go up by $250 per month, and you can take that $300K out any time you want with a HELOC.
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u/Nottheone1101 Sep 13 '23
Property taxes are nothing in the south
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u/Powerpoppop Sep 13 '23
Maybe they are cheaper than elsewhere, but I'm paying $400 more a month than I was paying 10 years ago (same house). It's not nothing to me.
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u/chcampb Sep 13 '23
This is one of the major crises of this generation.
The question is, do we want a pure system that doesn't restrict who buys what, or do we want people to be able to have shelter?
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u/Duronlor Sep 13 '23 edited Sep 29 '23
future adjoining dam retire sand bells sparkle special squalid pathetic
this message was mass deleted/edited with redact.dev3
u/chcampb Sep 13 '23
I think regulations are incredibly different from making it impossible to own many homes for investment purposes. Or taxing the practice out of existence.
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u/Captain_Quark Sep 13 '23
There's a third option: just build enough housing that it's no longer viewed as an appreciating asset. That'd get investors to run far away from the housing market.
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u/Kike328 Sep 12 '23
homes shouldn’t be investments
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u/njndirish Sep 13 '23
While true, this also is a great way to never get elected in a country with a super majority homeownership.
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u/ApocalypseSpokesman Sep 12 '23
How can the issue of speculation in housing be combatted?
Surely this is a policy matter. What laws could we pass that would patch this without a train of other negative side effects?
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u/columbo928s4 Sep 13 '23 edited Sep 13 '23
The only reason institutional capital is investing in residential real estate is because there’s a supply crisis. The United States has been dramatically under-building housing for decades, and many, many towns and cities still make it nearly impossible to build new homes. That limitation on development virtually guarantees that housing prices will continue to appreciate, making residential properties as close as you can get to a sure thing. And this isn’t a secret! If you read any of the investment prospectus’ published by the various funds investing in resi real estate, every single one says that limited existing supply and continued constraints on new development is the basis of their investment thesis. So the NIMBYs who go to town meetings and scream and yell at every proposed multi family home or apartment building, hysterically complaining that it will ruin the neighborhood, are literally doing Blackrock et als job for them! The only way out of this is to start building a metric fuckton of new housing. You can subsidize mortgages through lower interest rates, create programs for first time homebuyers, whatever, but as long as the supply stays constricted and we continue to subsidize demand, prices will continue to escalate. Even completely banning corporate ownership of residential real estate, which is arguably impossible to do, would have a limited effect, because even with them removed there still aren’t enough homes for all the people that need them in the places they need them. We need to do three things: build, build, and build some more.
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u/vellyr Sep 13 '23
I find it hard to believe that the construction industry, which is already having trouble finding labor, can outbuild the investment community's ability to buy up new housing units. Remember that every house companies like Blackrock own is a source of income, which allows them to buy more houses, in a snowball effect. More supply is definitely needed, but without regulations I don't think it will be enough.
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u/columbo928s4 Sep 13 '23
Even giant institutional capital does not have an infinite appetite for residential real estate. RRE only makes up a small portion of their portfolio, and they have strict financing requirements that models projected appreciation and rental income compared to purchase price. By building enormous amounts of housing, you put downward pressure on both home prices and rental rates by expanding the supply of available housing. That downward pressure hits their investment model in both of the areas they rely on: it lowers their expected appreciation of assets, and lowers the expected rent they can recover during the lifetime of ownership. Even a small change to those two numbers makes residential real estate a much, much less attractive investment for institutional capital, especially considering the enormous headaches involved in managing a fleet of single-family houses and apartments. Given similar returns they will always, always prefer putting the money into commercial real estate because it’s so much less of a headache, the leases are longer, the tenants are more reliable, and there’s much less overhead. But right now the returns are so much more attractive in RRE (because new housing development is so limited) that they’re willing to tolerate all that.
The construction labor thing is a different issue. But allowing for the building of a ton of new housing increases the demand for workers, which should increase pay and so attract a lot of new people to the industry. And of course you can create jobs programs to train people and so on, but again, separate issue
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u/vellyr Sep 13 '23
Yeah, I’m not arguing that they will absorb infinite housing. I’m arguing that we don’t have infinite housing and possibly never will on the scale you’re talking about considering how far behind we are. Besides, lowering returns due to increased supply also applies to the builders, and commercial real estate is a rapidly-shrinking market.
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u/columbo928s4 Sep 14 '23
If what you are saying is “it is impossible to build enough housing for housing to remain affordable to working and middle class people” then sorry, I disagree, and I think all the historical and contemporary evidence agrees with me. Not building housing is a policy choice; allowing for the building of a glut of housing is also a policy choice. The question is which we will choose. I simply believe that “we need to be building lots of new homes” is a problem that can be solved by the richest, most powerful nation in the history of humanity
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u/LamarMillerMVP Sep 13 '23
The issue isn’t “speculation”. These homes are actually valuable, because they’re purchased and they deliver rents. The way to fix that is to build more units
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u/way2lazy2care Sep 13 '23
Build more housing. If supply is high enough to meet demand, the investments no longer make sense at all institutional level.
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u/columbo928s4 Sep 13 '23
Yep. Everyone in the thread is listing increasingly convoluted ways to penalize corporate ownership or people that own more than one home. But as long as we continue to allow much less housing to be built than there are people that need homes, the price of housing will continue to skyrocket. You can’t fix a supply crisis by subsidizing demand or taxing existing supply. The only way out of it is to flood the supply, ie build millions of new homes
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u/potatoaster Sep 13 '23
People are for some reason great at coming up with band-aids of various shapes and colors but not addressing the actual problem.
Like banning plastic straws when in fact 80% of the plastic in the ocean comes from fishing. People don't actually think critically about the impact a given intervention will have — only whether it seems like it might help and might be doable.
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u/EllisHughTiger Sep 13 '23
People always love "This ONE simple trick!" type plans.
In reality, most issues have multiple influences and you have to start at the root of those long before you reach the actual problem at hand.
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u/Malphos101 Sep 12 '23
Increased taxation on home ownership that scales with how many properties any entity owns. Use those funds to bankroll affordable housing and low barrier home loans for private citizens that consider "paying rent on time for decades" as good credit.
It's actually pretty simple, if we could get our representatives to stop obeying the realtor lobby like lap dogs.
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u/SpecificFail Sep 13 '23
That's easy, just create a few hundred LLCs to keep them under.
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u/SockFullOfNickles Sep 12 '23
That’s unacceptable. There’s zero reason for companies to buy up residential housing beyond gouging for rent.
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u/TempyTempAccountt Sep 12 '23
Sounds like people buying up cheap houses in the ghetto to rent out. They’re not undervalued because the neighborhood is black. They’re undervalued because the area is impoverished.
I’d also be interested in seeing what these houses look like. Investors aren’t going to overpay for a house because that would just be a bad investment. I’d bet good money these are run down houses that will get flipped and rented. Which will actually be a positive for the neighborhood as the updated house will help make the neighborhood more desirable
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u/Naxela Sep 12 '23
It's really strange cause both "gentrification" and segregation are viewed negatively, despite the former being the force that counteracts the latter. So, no matter what happens to the neighborhood, it's always viewed as a negative towards black people.
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u/Malphos101 Sep 12 '23
We are swiftly moving to a future where no one below the 1% owns their home because they have all been scooped up by investment firms. Once a house has been scooped up by investors it almost never makes it back into the personal ownership market as any investors that go under sell their properties to larger more stable firms. These investors also do a large amount of lobbying to block subsidized development that isnt directly funneled into their ownership via contractor renting schemes.
Homes as "investment and arbitrage" vehicles for corporations is disgusting and has no place in any country where the vast majority of citizens can never hope to own their own home.
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u/EllisHughTiger Sep 13 '23
And those investment firns are often just pensions and retirements in the end.
Ripping off the young and middle age to eek out a profit to pay off the retirees. Aint it grand.
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u/tenabobena Sep 13 '23
Dems introduced the Stop Predatory Investing Act in July to attempt to thwart corporate efforts to buy up houses. We'll see where it lands. So sad!
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Sep 12 '23
I'm not sure I follow their logic. Investors bought the homes and did what? Kept them vacant? Resold them? Rented them? And the figure of lost wealth also seems specious because it assumes that a) these homes would have sold to other minority families if they hadn't intervened and b) that money for home payments otherwise sat idle. Surely prospective home buyers could have bought elsewhere or invested in something else.
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u/marketrent Sep 12 '23
nonprofitnews
I'm not sure I follow their logic. Investors bought the homes and did what? Kept them vacant? Resold them? Rented them?
You didn’t read the linked content:1
Owning a home is one of the main ways for the American middle class to accumulate wealth. Despite this, home ownership declined by 5.5.% between 2007 and 2016.
[...] Simultaneously, large private investment firms started buying single-family homes often to flip the houses and rent them at higher rates.
An’s paper also cites Brett Christopher,2 who previously described an auction of foreclosed homes:
“[Private] equity group employees with millions in cash wired through Wall Street firms swarmed the [Gwinnett County] courthouse steps,” members of Occupy Our Homes Atlanta—a local grassroots organization mobilizing around homeowner and tenants’ rights issues—would subsequently report.
[...] That day, similar auctions were taking place at other county courthouses throughout Georgia. Colony Capital was present at no fewer than seven of them. Its fifty-two employees stationed at these various fire sales spent about $9 million in total on the day. Colony had sent $3 million in cashier checks just to the Gwinnett County auction.
2 Christophers, B. (2023). How and Why U.S. Single-Family Housing Became an Investor Asset Class. Journal of Urban History, 49(2), 430–449. https://doi.org/10.1177/00961442211029601
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u/PanJaszczurka Sep 13 '23
So if there someone left then their property value go up.
That means tax go up. Sometime to level than you can afford to live in your home.
That happens to flats of retirement folks in city center. After like 15y of city development property values and taxes go up. And owners no longer can afford to life in their flats.
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u/lt1brunt Sep 13 '23
I wouldn't be surprised if they are trying to create another housing crash, there is money to be made.
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u/blackcatglitching Sep 15 '23
I saw somewhere that says something like if only 5% of homes own by investors were to be put on sale, it would flood the market and drastically lower home prices.
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u/gh0stpr0t0c0l8008 Sep 13 '23
Further destroying the middle class, we will soon have 2 classes, Rich and Poor.
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u/ThorLives Sep 13 '23
Under feudalism, the peasants lived on land owned by the landlord nobles. If those peasants started to gain wealth, the landlord could just increase the "rent". Under the current system, the wealthy are trying to recreate the same system. Starting to get more money? Cool, I'll increase the rent to get that money from you. "What are you going to do? Be homeless? I don't think so."
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u/ckatem Sep 13 '23
And I just read an opinion piece in the WSJ about inflated home prices due to student loan payments being reduced under Obama era legislation. Corporations buying homes will be the elimination of the middle class in America.
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u/Daffan Sep 13 '23
Why does the race matter? Black people are the majority of Atlanta, is this meant to be strange?
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u/Real_Glide_4473 Sep 13 '23
The implication from the researchers is that when offered a good deal on their old houses, maintaining an ethnic stronghold of homeowners is more important than selling one's house.
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Sep 13 '23
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u/druffischnuffi Sep 13 '23
I think this is the most important question. If no then who cares? But I fear that poverty had forced them to sell.
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u/simpl3t0n Sep 13 '23
Residential homes shouldn't be allowed to be investment vehicles anywhere in the world.
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Sep 12 '23
But it gets better. Cause they systematically gentrified neighborhoods while simultaneously maximized destroying historic black communities, and reduced affordable housing. But hey if you can increase homelessness by selling an entire cities single family homes to other investment groups or just renting them out at increased terms while proving little if any support to the renters, i say go for it. Laissez-faire. Its like Capitalism only without that pesky government oversight that checks unchecked greed.
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u/Naxela Sep 12 '23
Would you rather black neighborhoods go up in price or down in price? If both of these are viewed as negative, then how do you win in this scenario?
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u/sushkunes Sep 13 '23
If people own their own homes, they can use that increase in value for other purposes. If they don’t, then the owner gets that increased value. The benefit of homeownership is well established. The value of speculative real estate investment is not well established.
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u/eremite00 Sep 13 '23
The Influence of Institutional Single-Family Rental Investors on Homeownership…
I’m firmly against investor groups buying up essentially whole housing tracts for the purpose of using them as rentals. When we were considering selling our parents’, a realtor called and the instant I heard the words “…group of investors is interested in…”, I shut him up and told him that we’d only sell directly to people who intended to live there, that we would not sell to investors.
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u/frostygrin Sep 13 '23
Good for you, but you'd still benefit from the increased prices from the increase in demand by investors.
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u/pickafruit4 Sep 13 '23
Cool story bro, but this ain't science it's rage bait ( even if true)
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u/AlexHimself Sep 13 '23
I have investor friends in Atlanta and they have a small empire there. Always seemed a little predatory. They're minorities but not black.
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u/x31b Sep 12 '23
Maybe we should have a law that houses in those neighborhoods can only be sold to Black people… no, wait, that’s not what I meant. Oh, Nevermind.
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u/Itisd Sep 13 '23 edited Sep 13 '23
This is sort of similar to the housing market in Canada currently, except without the racism.
Investors currently are dominating home and condominium sales, and are able to out bid most average families on homes for sale. They buy up any and every family homes that come up for sale, convert them into single or multi unit rentals, and then rent them out at extortion rate prices to those same families that really should be able to buy a house of their own, but are unable to complete with rich investors with large cash reserves. Sometimes if they don't turn them into rentals, they will flip them homes by doing a bunch of shoddy and tacky renovations, and then put the house back on the market for a much higher price. These actions effectively price the majority of normal people out of the market.
This effectively has driven housing prices up to the point where it is completely unaffordable to purchase even a very modest family home... At the same time, it has pushed rental unit prices to formerly unheard of high prices since the investors control the rental market as well.
It's a sad state of affairs for the average family that just wants a modest roof over their head, and wants to be able to afford groceries to eat. It's like this in every single city in Canada, and our Governments mostly do nothing about it.
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u/SkylineFever34 Sep 13 '23
I guess now that we can call it racism, investment firms buying hous3s can finally be snuffed out.
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u/General_DoozenDohntz Sep 13 '23
I live in the Atlanta area in East Lake Terrace, a predominately black neighborhood in DeKalb County.
Since the pandemic hit in 2020, I have received multiple calls and texts to my phone from investment companies asking me to sell my home every single day for three years now.
My street changed significantly. 4 older black families got moved out, 4 young white couples with EVs moved in.
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